Covid-19 overwhelmed hospitals in many metropolitan areas in 2020, and patients hospitalized with the virus often had alonger length of staycompared to other conditions. Healthcare costs overall, however,are expectedto be anywhere from $75 billion to $575 billion less than a normal year due to deferred care from the pandemic.
With such a dramatic decrease in costs, Medicare Advantage (MA) organizations now face a significant financial forecasting challenge in submitting their bids to the Centers for Medicare & Medicaid Services for the coming plan year. Perhaps aware of this uncertainty among MA organizations, in January, CMS released the final rule for its MA and Part D payment methodologies for the 2022 contract year, months earlier than in previous years.
While some of the changes in the 2022 final rule had been announced before Covid-19, several updates, particularly to the payment growth rate, were unexpected. The following are the top 5 changes in the MA and Part D final rule for 2022.
1. Effective payment growth rate higher
In the rule’s Advance Notice, CMS estimated that the effective payment growth rate for 2022 would be 4.55%, but that jumped to 5.59% in the final rule, resulting in a 4.08% increase in revenue. This is a good sign for MA organizations, indicating that CMS is not expecting a significant cost rebound after the major drop due to deferred or foregone care.
That does not mean, however, that health plans can remain complacent. Contract bids to CMS need to be based on the most current and accurate Hierarchical Condition Category (HCC) data available. If plan members have been avoiding in-person care, such as their annual wellness Visits, for a year or more, the risk of new care gaps or chronic conditions increases.
For example, 36%of Medicare beneficiaries this past summer reported foregoing their regular check-up and treatment for a chronic condition. This indicates that member outreach and engagement efforts need to ramp up this year to close care gaps and identify any new health challenges that may have emerged in 2020.
2. New risk score methodology finalized
Although payment growth will be higher than expected in 2022, this revenue increase may be offset for some payers due to changes in the risk adjustment factor (RAF) score calculation. As announced years ago, in 2022, the RAF score will be 100% based on data from the Encounter Data System (EDS) and fee-for-service claims instead of a blend of encounter data and Risk Adjustment Processing System (RAPS) data.
The challenge here for MA plans, again, is incomplete data to calculate an accurate score. With members foregoing care, HCCs could be missing or overlooked. Encouraging members to seek preventive care or chronic condition management can improve the accuracy of the scores, but MA payers can expect a small financial loss per member per year due to the EDS transition and incomplete data.
Newer MA organizations may also need to reach out to partners with experience in the technical requirements to calculate accurate risk scores and avoid financial losses in the contract year.
3. Telehealth here to stay
Among the many other designations, 2020 may be known as the year everyone used telehealth, including seniors. Sixty percentof Medicare beneficiaries with a regular provider reported access to telehealth appointments. This adoption rate is likely to increase given that 82% of seniors also report that they have high-speed Internet access and91% of Medicare Advantage plan membersreport at least somewhat favorable telehealth experiences.
The Medicarepayment rule changesregarding telehealth enacted early in the pandemic remain intact in the 2022 MA final rule. For risk adjustment, CMS views telehealth-permissible codes the same as in-person codes, and that encounter data can be applied toward risk scores. This means MA organizations should continue to promote telehealth services to their members to encourage adherence to chronic condition management and preventive care. Encouraging telehealth utilization is important because while millions of seniors have obtained a full COVID-19 vaccine as of this writing, many millions more have not and may still prefer to avoid visiting their provider in person.
Telehealth will also be important for MA plans in addressing behavioral health and other social determinants of health. In a survey conducted last summer, nearly half (46%)of beneficiaries reported feeling more stressed or anxious, while 23% reported feeling more lonely or sad. Telehealth can help beneficiaries more easily connect with behavioral health providers.
4. New Rx HCC Model
The Part D Hierarchical Condition Category (RxHCC) model was updated in the 2022 final rule and may impact MA organizations’ bottom lines. For example, the risk score calculations will be based on 2017 diagnoses paired with 2018 drug data, each updated by three years. Like the RAF score, the RxHCC will be based solely on encounter data, which may be lacking for most organizations due to the delayed or foregone care. Regardless,estimatesshow an across-the-board risk score decrease for RxHCC, which means reduced revenue for MA organizations on drug costs.
However, plans can expect to recover those losses in the coming year as more beneficiaries resume in-person care.
5. ESRD Restriction Lifts
The 2022 MA contract year will be the first time individuals with end-stage renal disease (ESRD) will be allowed to enroll in a plan. Although increasing membership is the goal of every MA organization, ESRD is a very expensive condition to manage. The average beneficiary with ESRD cost$67,116in 2016 compared to $10,182 per beneficiary without the condition. Another report showed that costs for members with ESRD exceeded MA benchmarks in nearly46% of metropolitan areas. MA organizations need to ensure going into their contract bidding process for 2022 that they have the most accurate and timely data available on new members with ESRD to avoid unanticipated financial losses.
Returning to Normal
As evidenced by the MA and Part D final rule for 2022, CMS is planning that this year will be a post-Covid-19 transition year for MA organizations and beneficiaries alike, but not an avalanche of utilization after a long period of deferred care. The greatest uncertainty is members’ health status, which could impact MA organizations’ bidding submission process for 2022.
Fortunately, fully vaccinated members are likely to resume in-person care this year, which means MA plans can expect a more consistent and reliable stream of data to form financial projections. With the right data management, member outreach, and engagement tools, the transition from 2021 to 2022 will be smoother for MA organizations.